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Foreign Aid Inflows And The Real Exchange Rate In The Cfa Franc Zone

Author

Listed:
  • Bazoumana Ouattara
  • Eric Strobl

Abstract

This paper presents an empirical analysis of the relationship between foreign aid inflows and the real exchange rate in the countries of the CFA Franc zone. Using panel data analysis we find that foreign aid inflows are associated with the appreciation of the real exchange rate in the CFA countries between 1980 and 2000. However, our results also suggest that the potential "Dutch Disease" effects associated with these inflows could be offset if appropriate policies are implemented.

Suggested Citation

  • Bazoumana Ouattara & Eric Strobl, 2008. "Foreign Aid Inflows And The Real Exchange Rate In The Cfa Franc Zone," Economie Internationale, CEPII research center, issue 116, pages 37-52.
    • Handle: RePEc:cii:cepiei:2008-4tb
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    File URL: http://www.cepii.fr/IE/rev116/ei116b.htm
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    Citations

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    Cited by:

    1. Emmanuel Owusu-Sekyere & Reneé van Eyden & Francis M Kemegue, 2014. "Remittances and the Dutch Disease in Sub-Saharan Africa: A Dynamic Panel Approach," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 8(3), September.
    2. repec:dau:papers:123456789/4066 is not listed on IDEAS
    3. Farid Makhlouf & Mazhar Mughal, 2013. "Remittances, Dutch Disease, And Competitiveness: A Bayesian Analysis," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 38(2), pages 67-97, June.
    4. Berg, Andrew & Portillo, Rafael & Zanna, Luis-Felipe, 2015. "Policy Responses to Aid Surges in Countries with Limited International Capital Mobility: The Role of the Exchange Rate Regime," World Development, Elsevier, vol. 69(C), pages 116-129.
    5. Blaise Gnimassoun, 2017. "Exchange rate misalignments and the external balance under a pegged currency system," Review of International Economics, Wiley Blackwell, vol. 25(5), pages 949-974, November.
    6. repec:unu:wpaper:wp2012-26 is not listed on IDEAS
    7. David Fielding & Fred Gibson, 2013. "Aid and Dutch Disease in Sub-Saharan Africa," Journal of African Economies, Centre for the Study of African Economies, vol. 22(1), pages 1-21, January.
    8. Mariem Brahim & Nader Nefzi & Hamed Sambo, 2017. "Remittances and the real effective exchange rates in MENA countries: What is the long run impact?," Working Papers hal-01583564, HAL.
    9. Farid Makhlouf & Mazhar Yasin Mughal, 2013. "Remittances, Dutch Disease, and Competitiveness: a Bayesian Analysis," Post-Print hal-01884858, HAL.
    10. Gnangnon, Sèna Kimm, 2020. "Development Aid, Remittances Inflows and Wages in the Manufacturing Sector of Recipient-Countries," EconStor Preprints 213439, ZBW - Leibniz Information Centre for Economics.
    11. Blaise Gnimassoun, 2012. "Taux de change et mésalignements du franc CFA avant et après l’introduction de l’euro," Working Papers hal-04141139, HAL.
    12. Pedro Martins, 2011. "Do large capital inflows hinder competitiveness? The Dutch disease in Ethiopia," Post-Print hal-00748067, HAL.
    13. Blaise Gnimassoun, 2012. "Taux de change et mésalignements du franc CFA avant et après l’introduction de l’euro," EconomiX Working Papers 2012-3, University of Paris Nanterre, EconomiX.
    14. Li, Ying & Rowe, Francis, 2007. "Aid inflows and the real effective exchange rate in Tanzania," Policy Research Working Paper Series 4456, The World Bank.
    15. Mouhamadou Sy & Hamidreza Tabarraei, 2010. "Capital inflows and exchange rate in LDCs: The Dutch disease problem revisited," PSE Working Papers halshs-00574955, HAL.
    16. Blaise Gnimassoun, 2015. "Exchange rate misalignments and the external balance under a pegged currency system," Working Papers hal-04141421, HAL.
    17. Zameelah Khan Jaffur & Boopen Seetanah & Noor-Ul-Hacq Sookia, 2020. "A cross-country analysis of the determinants of the real effective exchange rate in fifteen Sub-Saharan African countries," Economics Bulletin, AccessEcon, vol. 40(2), pages 1686-1697.
    18. David Fielding & Fred Gibson, 2013. "Aid and Dutch Disease in Sub-Saharan Africa," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 22(1), pages 1-21, January.
    19. Fredrick Ikpesu & Abraham Emmanuel Okpe, 2019. "Capital inflows, exchange rate and agricultural output in Nigeria," Future Business Journal, Springer, vol. 5(1), pages 1-8, December.
    20. Gnangnon, Sèna Kimm, 2022. "Effect of structural economic vulnerability on the participation in international trade," EconStor Preprints 262004, ZBW - Leibniz Information Centre for Economics.
    21. Sèna Kimm Gnangnon, 2022. "Aid for Trade, export product diversification, and foreign direct investment," Review of Development Economics, Wiley Blackwell, vol. 26(1), pages 534-561, February.
    22. Mouhamadou Sy & Hamidreza Tabarraei, 2010. "Capital inflows and exchange rate in LDCs: The Dutch disease problem revisited," Working Papers halshs-00574955, HAL.
    23. Ahmad, Ahmad Hassan & Pentecost, Eric J. & Stack, Marie M., 2023. "Foreign aid, debt interest repayments and Dutch disease effects in a real exchange rate model for African countries," Economic Modelling, Elsevier, vol. 126(C).

    More about this item

    Keywords

    Aid; Panel Data; Real Exchange Rates;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F35 - International Economics - - International Finance - - - Foreign Aid

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